The establishment of East African Monetary Institute (EAMI) has reportedly been postponed. This implies that the EAC aspiration for a single currency may not be realised upon expiry of 10-year roadmap towards a single currency in the year 2024.
The postponement has been occasioned by lack of resources.
Establishment of the EAMI is precursor to the institution of the East African Central Bank, without which the East African Monetary Unit may not take flight.
Tongues are incriminatingly already wagging: Is the EAC single currency really viable, even necessary, especially in light of the lessons we are gleaning from the imminent British exit (Brexit) from the European Union, or the near exit of Greece (Grexit) last year when it wallowed in debilitating debt and seeking bailout?
First, Britain’s lesson with the Pound Sterling is that a country may be a member of a highly integrated regional community and yet not be part of a single currency and thrive.
But the larger lesson lies in the complications Brexit is posing about what it will mean for labour and free movement guaranteed under the Schengen arrangement, notably what to do with EU citizens living and working in Britain and vice versa – if, and when, Brexit is legally operationalised.
Indeed, Brexit has become something of a rallying cry for far-right political parties across Europe that is threatening to tear apart the EU project.
Britain may have done well with the Pound Sterling. But the socio-economic and political costs of Brexit to the EU and Britain may prove to be too huge, so that it now appears increasingly likely Brexit will be postponed longer than may have been anticipated, or never happen at all.
We will keep a keen eye, mindful that the EAC is nascent and still grappling with some teething issues yet to be ironed out, not to mention concerns that have occasionally arisen of expatriate labour in some of the member states. Free movement by EAC citizens across borders remains a far cry from the seamless Schengen arrangement in Europe.
But there is also the Greek lesson. While seeking bailout, austerity measures forced on the country by its debtors – the European Union, the European Central Bank and the International Monetary Fund – sent Greece’s debt hurtling to 180 per cent of GDP, seeing the economy shrink by a quarter. (see “Grexit: What lessons for the EAC?”).
As it appeared then, the problem lay with the euro for the country. Suppose, as pundits wondered, Greece had never adopted the euro, that it had merely fixed the value of the drachma (its former currency) in terms of euros?
Basic economics would have demanded that it could let the drachma’s value drop, both to encourage exports and to break out of the cycle of deflation that had brought the country to its knees. The country hobbles towards recovery, but it would survive after its lenders relented.
Skeptics may wonder about the necessity of the EAC single currency given the dramatic goings on in the eurozone to save the EU project.
And, it may be that the reported lack of resources has necessitated the postponement to establish the East African Monetary Institute, which may also be indicative of deeper regional issues between the partner states that need to be addressed. But nothing should be allowed to derail EAC project.
I am only speculating, with the appreciation that those of us who have been privileged to live and work away from our home countries know that the EAC project has been kind to us, though it has been harsh at times.
An EAC spokesperson is reported to have explained that the EAMI will now be established through an Act of the East African Legislation Assembly. He acknowledged this will delay other institutions – the East African Statistics Bureau, the East African Surveillance, Compliance and Enforcement Commission, and the East African Financial Services Commission – to activate the East African Monetary Unit. Nobody knows how long this will take.
For all we can tell, the political will remains resolute the EAC dream will succeed, emulating the good in the eurozone.